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Indonesia’s central bank could buy government bonds with zero to low yields

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The Indonesian finance minister said on Monday that the government could sell more bonds to the central bank to finance its COVID-19 response, some of which would carry zero return, via a private placement.

The Bank of Indonesia (BI) can bear 100% of the interest rate burden to finance certain government programs considered to be public goods, such as health spending, social protection and budget support for regional governments, for a total of 397 trillion rupees ($ 28 billion), Finance Minister Sri Mulyani Indrawati said in parliament.

BI could also fund non-public goods programs by buying bonds with a coupon rate one percentage point below its benchmark rate, said Indrawati, adding that she and BI governor Perry Warjiyo were discussing always the amount to sell to the central bank and the market.

Warjiyo, who was also present at the hearing, reiterated that BI was ready to “share the burden” and said that the two sides would provide good governance. ($ 1 = 14,170.0000 rupee)

(Report by Gayatri Suroyo and Tabita Diela; Editing by Martin Petty)

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